Alfi has been expanding overseas. Director general Camille Thommes talks to Angele Spiteri Paris about new markets for Luxembourg funds.

As the ambassador for “brand Ucits”, the Association of the Luxembourg Fund Industry (Alfi) has had a vital role in the success of Luxembourg-domiciled products being sold overseas. The success story in Asia is renowned, but Latin America is now gaining a more important role in the Ucits play.

Alfi is one of the only fund associations in Europe to have opened an office overseas. Following the significant sales figures of Luxembourg-domiciled Ucits funds in Asia, the association opened an office in Hong Kong.

Camille Thommes, director general, Alfi, says: “Opening the office in Hong Kong was a big step to take. We decided to focus on Asia because it became the main non-European market for Ucits funds and we chose Hong Kong because it is centrally located and one of the main distribution hubs in Asia.”

The Hong Kong Alfi office has now been up and running for just over two months and Thommes says the response has been very positive.

When opening the office, Alfi said that its objectives were not just to promote the Ucits brand in the region but also to monitor the regulatory and legal developments in the region.

This may be becoming more important as talk of an Asian Ucits-type structure has been increasing.

But Thommes is not perturbed by this.

“The idea to copy the success of the Ucits brand has been mentioned and we’re watching the development on that front. But you have to remember that the Ucits brand has been developed into a worldwide recognised label over the years. It doesn’t happen overnight, you have to build that up gradually.

“Ucits was born in the 80s and it’s only as time went by that it became known as a safe and well-regulated product that attracted investors in regions other than Europe.”

So, he says that a good track record and acceptance of the product is important and takes time to set this up.

However, as this Asian Ucits structure is still but a phantom, the popularity of Ucits and specifically, of Luxembourg-domiciled Ucits funds, overseas has only been increasing and the obvious question for Alfi would be whether another office abroad is being considered.

Further movementDespite a report claiming that Alfi was to open an office in Chile, Thommes clarifies that for the moment, there are no such plans.

“We will carry out an assessment of the Hong Kong office, evaluate how that operation has served us and then see where we go from there,” he says.

But although it might be premature to discuss new ventures when the latest one is still so fresh, the success Ucits products have already enjoyed in Latin America and the potential still in the market as the continent’s economies grow on the back of commodity wealth and trade with China are undeniable.

Thommes says: “Next to Asia, Latin America is one of the most important regions for the distribution of Ucits.”

He says Ucits products are proving popular in some of these markets. “In Chile and Peru, Ucits are eligible investments for pension funds and the Luxembourg-domiciled products have been gaining traction in those markets,” says Thommes. “In Chile, Luxembourg enjoys a significant market share of foreign funds in which locals invest. The same goes for Peru.”

Of foreign funds held by local investors in Chile, 71% are registered in Luxembourg, while in Peru, 358 of the 590 foreign funds distributed are domiciled in Luxembourg.

Brazil is another country of potential growth for Ucits funds. Thommes explains: “The Brazilian authorities changed local regulations and raised the threshold of the percentage of assets local pension funds can hold in foreign funds. Ucits have the track record to be eligible so there is a good opportunity there.”

However, it’s not just about European products being sold into Latin America. The indigenous fund managers are also making use of Luxembourg and the Ucits framework.

It is well-known that Asian asset managers, such as Mirae Asset, have been setting up Luxembourg-domiciled Ucits to sell their products back into their home markets.

And now Latin American managers look to be following in the Asian footsteps.

Thommes says: “We’ve seen local, Latin American asset managers setting up structures in Luxembourg for their cross-border distribution. Mostly, these have been Brazilian fund managers and institutions. But I wouldn’t exclude the possibility of Chilean players doing the same.”

He says the association is also monitoring developments in other Latin American countries. “In October, we went on a financial mission to Chile, Brazil and Uruguay. We had a high turnout of participants and found that Luxembourg funds were well known and well received,” says Thommes.

Another pocket of potential for Ucits funds is the Middle East. With some of the largest pools of money in the world, particularly in sovereign wealth funds.

Positive resultsEfforts towards increasing the distribution of Luxembourg-domiciled Ucits in the Middle East are more recent than those in Latin America, but the prospects are positive.

“In Bahrain, there are a large number of Luxembourg funds already registered. There is also a lot of interesting potential in the region in countries such as Saudi Arabia, Dubai and Abu Dhabi,” says Thommes.

“The Middle East is definitely an area that is on our radar screen and there have been a lot of promotional efforts made over the last two and a half years to get Luxembourg better known in the region. And we’ve seen positive results.”

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